MARCUS CORPORATION 
VMAX
INCENTIVE PLAN TERMS  



Plan Sponsor: 
The plan will be
sponsored by The Marcus Corporation (“Marcus Corporation” or the “Company”).  



Plan Objectives: 
The objectives of
The Marcus Corporation’s VMAX Incentive Plan are to:  



	• 	Reward
employees for their contributions to profitability, returns, and growth. 





	• 	Focus
employees on the long-term success of The Marcus Corporation. 





	• 	Align
employee rewards with shareholder interests. 





	• 	Provide
competitive total compensation opportunities. 






Effective Date: 
The VMAX Incentive
Plan will become effective as of June 1, 2003.  



Plan Year: 
A Plan Year is from June 1st to
May 31st and coincides with Marcus Corporation’s fiscal year.  



Administration: 
The Plan will be
administered by the Compensation Committee of The Marcus Corporation’s Board of
Directors (the “Committee”), which reserves the authority to amend, interpret,
or terminate the plan in whole or in part at any time. The Committee may delegate
responsibility for plan administration to such officers of the Company as it determines
in its sole discretion from time to time.  



Eligibility and Participation: 
All
salaried employees are eligible to participate. Participants will be selected annually by
the Chairman and Chief Executive Officer.  



Participating positions will vary by
division. In addition, participation will be phased in over the first two Plan Years. 




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Base Salary:  
Base Salary used to
determine actual incentive awards will be an individual’s actual rate of Base Salary
in effect at the end of the Plan Year, without regard to voluntary salary reductions,
such as under the 401(k) Plan, Flexible Benefit Spending Plan, etc. See sections
discussing New Hires, Promotions, and Transfers for additional information.  



Incentive Opportunity: 
Each
participant’s target incentive opportunity will be expressed as a percentage of Base
Salary and will be determined annually by the CEO and Division Presidents. Target
incentive awards will be earned if relevant consolidated, division, district/city, and
facility Economic Profit (EP) targets are achieved. In addition, VMAX-eligible division
employees will have a portion of their incentive opportunity based on the achievement of
operating goals other than EP.  



VMAX incentive opportunities will be
communicated to employees by the CEO and Division Presidents after consolidated, division,
district/city, facility, and individual goals are set at the beginning of each fiscal
year. 



Incentive Opportunity Weighting and
Allocation: 
The percentage of incentive opportunity that will be determined by the
achievement of consolidated, division, district/city, and/or facility EP performance
varies by level within the organization. These weightings may be revised annually based
on the CEO’s discretion and Marcus Corporation’s business objectives. (Example:
a district director’s incentive opportunity might be weighted 80% based upon
achievement of district goals and 20% based upon achievement of division goals).  



EP Performance Goals: 
chieving
sustained growth in EP is the primary goal of the VMAX incentive program. Based on an
analysis of shareholders’expected returns, an initial three-year EP target path has
been identified for Marcus Corporation and each Division reflecting an expected level of
annual improvement in EP. Each year’s target EP performance is expected to be equal
to the previous year’s actual EP plus the required improvement amount. The EP target
path and required annual EP improvement amounts will be reassessed approximately every
three years, or when there is a significant change in the structure of the Company, or if
external influences affecting investors’ expectations for the lodging and motion
picture theatre industries significantly change.  



Other Performance Factors: 
To retain
focus on non-EP operational results, a portion of individual incentive amounts will be
paid based on other performance factors. In all cases, incentives based on other
performance measures will not be paid out if EP is below a predetermined level.  



Operating Positions: All
participants in operating positions will have 20% of their total incentive opportunity
based on non-EP performance goals. 




2 









Staff Positions: Separate
awards of up to 20% of target incentive opportunity are available for staff positions to
reward extraordinary contributions or performance. An incentive pool will be funded for
this purpose. Awards made from this pool will be determined by the appropriate Division
President or the CEO, as appropriate based on the participant’s position. 



Individual Performance: 
Division
Presidents and the CEO reserve the right to eliminate a participant’s incentive
award on the basis of sub-standard individual performance. All participants with a
performance rating below a predetermined level will be reviewed for this purpose.  



Initial Incentive Award Calculation:

The first step in determining an incentive payment is to measure the consolidated,
division, district/city and facility EP earned during the Plan Year. The EP calculation
method at each division will address the specific needs and considerations of each
division. The calculated EP amount is compared to target EP and the EP interval for the
Plan Year to determine the percentage of target EP-based incentives earned. The table
below illustrates how the interval helps determine the incentive payout assuming an EP
interval of $10 million.  






	
	$10 million

below target EP
	$5 million below

target EP
	Target EP
 
	$5 million above

target EP
	$10 million above

target EP

	EP Incentive Earned	0% of target	50% of target	100% of target	150% of target	200% of target
	







The actual performance is translated
into a percentage of target incentive opportunity (e.g., 50% of target, 150% of target,
etc.) by comparing the difference between target and actual EP to the EP interval and
interpolating to arrive at the percentage of target incentive earned. 



The actual VMAX incentive earned as a
percentage of salary is then calculated by multiplying the percentage of target award
earned by the participant’s target award expressed as a percentage of salary. This
percentage is then multiplied by the participant’s Base Salary, as defined for
purposes of the Plan, to calculate the amount of the participant’s initial incentive
award. 





3 









Incentive Banking: 
Once each
participant’s initial incentive has been calculated, any incentive amount earned
based on EP goal achievement will be subject to the incentive banking process.  



In the event that the participant has
a percentage of his or her target bonus opportunity allocated to non-EP performance goals,
the incentive earned based on non-EP goal achievement will not be banked. Only incentives
earned based on EP performance will be banked. 



An individual incentive bank balance
will be maintained for each participant. In the event of a transfer or other change in a
participant’s position, the participant’s bank balance, positive or negative,
will remain linked to him or her. The incentive bank balance is a notional amount. It is
not funded and is not property of the employee. 



The incentive banking process is
designed to pay out each year a participant’s balance up to the annual target
incentive opportunity, plus one third of any bank balance above the target opportunity
amount. The steps below are followed to determine each participant’s annual payout
from the incentive bank. 



     	1.	
          In Year 1, the starting bank balance is zero. In subsequent years, a starting
          bank balance may be carried forward from the prior year (see step 5 below). 





     	2.	
          Once the initial EP incentive is determined, it is added to the starting bank
          balance for the year. 





     	3.	
          The resulting bank balance will be paid out in full, up to the
          participant’s target EP-based incentive amount. 





     	4.	
          If the individual’s bank balance for the year after the addition of the
          initial incentive amount exceeds target, one-third of any amount over target
          will also be paid out to the participant. 





     	5.	
          The remaining two-thirds of the amount over target will be retained and carried
          forward as the next year’s beginning bank balance. Future initial incentive
          amounts will offset any negative incentive bank balance. 


          



Attachment A provides example
incentive banking calculations. 



Eligibility for Incentive Award: 
To
receive an incentive payment for a Plan Year, a participant must:  



	• 	Be
actively employed for at least three months of the Plan Year; and 





	• 	Be
employed on the date on which incentive awards are paid to plan participants. 








4 









Form and Timing of Payout: 
Amounts
earned based on EP performance and paid out from the incentive bank and amounts earned
based on achievement of other performance measures will be paid in cash following the end
of the Plan Year. It is anticipated that payment will be made within 90 days following
the Plan Year.  




Determination and Communication of
Performance Measures and Goals:  
Target EP for each Plan Year will be determined for the
Company, each Division, and each participating city, district, and property as soon as
practicable after the EP results from the previous year are finalized. Non-EP operating
performance measures and goals will be determined by each Division President and approved
by the CEO. All goals will be finalized and communicated to incentive plan participants
as close as possible to the beginning of the Plan Year.  



Communication of Performance
Achievement  
Progress towards the achievement of consolidated, division, district/city,
and facility EP goals will be communicated periodically during the Plan Year. A final
communication of actual achievement against goals will be issued as soon as possible
after results are available following the end of the Plan Year.  



New Hires 
A newly hired employee
will be eligible to participate in the VMAX incentive plan if he/she meets the
eligibility and participation criteria and begins work at leastthree
months prior to the end of the Plan Year. The newly hired employee’s actual rate of
Base Salary at the end of the Plan Year will be prorated based on the number of months
worked rounded to the nearest whole month as a proportion of the Plan Year.  



Promotions 
Eligible participants who
are promoted during the Plan Year will receive a prorated incentive payment based on:  



	 	•	The
number of months worked in each position, rounded to the nearest whole month, as a
fraction of the number of months worked during the Plan Year, and 






	 	• 	The
participant's previous and new rates of base salary and incentive opportunities, and






	 	•	If
applicable, the EP and other performance goals and actual performance applicable to the
participant’s previous and new positions. 

















5 









Transfers 
Participants who transfer
between functional areas during the Plan Year will receive a prorated incentive payment
based on:  



	 	•	The
number of months worked in each role, rounded to the nearest whole month, as a fraction
of the number of months worked during the Plan Year, and 






	 	• 	The
participant's previous and new rates of base salary and incentive opportunities (if
applicable), and






	 	•	If
applicable, the EP and other performance goals and actual performance applicable to the
participant’s previous and new positions. 






Exceptions may be made in the event
that a participant is transferred late in the Plan Year and does not serve a minimum
number of months in his or her new position. In this case, his/her incentive may be based
fully on the results of the pre-transfer location. 



Termination of Employment 



Voluntary or Involuntary Termination

Upon an employee’s voluntary termination of employment or the involuntary
termination of an employee’s employment by The Marcus Corporation with or without
cause during the Plan Year, any incentive that would have been earned during the Plan
Year will be forfeited. In addition, the employee will forfeit his/her incentive bank
balance.  



Retirement 
Upon a participant’s
retirement from The Marcus Corporation at normal or early retirement age, a prorated
incentive payment will be made based on the number of months the participant was employed
during the Plan Year, rounded to the nearest whole month. This payment will be made at
the time that incentive awards are paid to active participants, and will be based on
actual goal achievement. All prorata amounts awarded based on EP performance will be
subject to the incentive banking process, and the participant’s incentive bank
balance will be paid out in full.  



Death 
Upon a participant’s
death, a prorated incentive payment will be made to his/her beneficiary as designated
under the Company’s Pension Plus plan, or if no beneficiary has been designated, to
the participant’s estate, based on the number of months the participant was employed
during the Plan Year, rounded to the nearest whole month. This payment will be made at
the time that incentive awards are paid to active participants, and will be based on
actual goal achievement. All prorata amounts awarded based on EP performance will be
subject to the incentive banking process, and the participant’s incentive bank
balance will be paid out in full.  



Disability 
Upon termination of a
participant’s employment due to permanent disability, as defined in the Company’s
Long Term Disability Plan, a prorated incentive payment will be made based on the number
of months the participant was employed during the Plan Year, rounded to the nearest whole
month. 



6 







This payment will be made at the
time that incentive awards are paid to active participants, and will be based on actual
goal achievement. All prorata amounts awarded based on EP performance will be subject to
the incentive banking process, and the participant’s incentive bank balance will be
paid out in full.  





































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ATTACHMENT A:
ILLUSTRATION OF INCENTIVE BANKING 



Assumptions: 



	

	Base Salary	 	$50,000 
	
 	% of Salary 	Dollars 
	
Total Target Bonus Opportunity	10%	$  5,000 
	             Based on EP	8%	$  4,000 
	             Based on Other Measures	2%	$  1,000 
	
Year 1 Initial Incentive Amounts Earned
	             EP Performance	 	150% of target 
	             Performance on Other Measures	 	100% of target 
	







Calculation: 



	

	Initial Incentive Amounts	 
	             EP Performance (150% of $4,000 target opportunity)	$6,000 
	             Performance on Other Measures (100% of $1,000 target opportunity)	1,000 
	
Incentive Banking1
	             Initial EP Incentive Amount	6,000 
	
             Beginning Bank Balance	0 
	             Initial Incentive Banked	6,000 
	             Subtotal (Bank Balance)	6,000 
	
             Amount Paid from Bank (Bank Balance up to target)	4,000 
	             Subtotal (Bank Balance over target)	2,000 
	
             Amount Paid from Bank (1/3 of Bank Balance over target)	    667 
	             Ending Bank Balance2	1,333 
	
             Total EP-based Incentive Paid	4,667 
	             Incentive Paid Based on Other Measures	1,000 
	                  Total Incentive Paid	$5,667 
	







1 Only EP-based incentive
amounts are banked. 



2 Subject to forfeiture on
termination of if future performance results in negative incentive amounts. 




8 









ATTACHMENT A:
ILLUSTRATION OF INCENTIVE BANKING (CONTINUED)1 



Assumptions: 



	Salary	$50,000 
	Target Opportunity (EP-based opportunity only)	8% 
	Target Total Incentive (EP-based opportunity only)	$  4,000 
	
Annual Payment	Bank balance up to target + 1/3 of balance over target 








	

			Year 1	Year 2	Year 3	Year 4	Year 5
	

EP Performance	 	150% of 
Target	Target	50% of 
Target	Negative	Target
	
Initial EP Incentive Amount	A	$6,000	$4,000	$2,000	($2,000)	$4,000
	
Beginning Bank Balance	B=F (previous year)	         0	 1,333	      889	         0	(2,000)
	Initial Incentive Banked	C=A	 6,000	 4,000	 2,000	(2,000)	 4,000
	Subtotal (Bank Balance)	D=B+C	 6,000	 5,333	 2,889	(2,000)	 2,000
	Amount Paid from Bank (Bank Balance up to
	target)	E=D up to target	 4,000	 4,000	 2,889	         0	 2,000
	Subtotal (Bank Balance over target)	F=D-E	 2,000	 1,333	         0	         0	         0
	Amount Paid from Bank (1/3 of Bank Balance
	over target)	G=1/3 F	      667	      444	         0	         0	         0
	Ending Bank Balance2	H=F-G	 1,333	      889	         0	(2,000)	         0
	
Total EP Incentive Paid	I=E+G	$4,667	$4,444	$2,889	        $0	$2,000
	







1 Only EP-based
performance incentives are banked. 



2 Subject to forfeiture
upon termination or if future performance results in negative incentive amounts. 




9